The mainstream media thinks that it has spotted a trend. Italian GDP continues to contract, albeit at a slower pace. In the last three quarters the contraction has slowed from 0.9% to 0.6% to 0.2%. Surely, the recession in Italy and indeed within the entire eurozone is coming to end thinks the journalist typing away at her desk. Don’t be so quick to call an end to this recession. The chart shows that this false dawn has happened before. Loans for businesses to expand and consumer spending are still dropping, and GDP will follow.
Wow, the mainstream media is partying up a storm today. First, Italian GDP shrank at slower pace and now German and British industrial production rises. Yay! Happy days are here again, or are they? While industrial production did increase nicely in both countries, the pop will be short-lived. Loans to the private sector are falling, so businesses are not expanding. Moreover, both countries have failed to increase retail sales in back-to-back months for over a year. While Germany and the U.K. are not periphery basket-cases, they are exhibiting lackluster economic performance and will continue to do so for the immediate future.
The U.S. trade deficit narrowed in June, and this surprise will undoubtedly raise 2nd quarter GDP figures. Unfortunately, just because GDP grew at a faster pace does not mean that the country is about to embark upon a boom. Incomes have yet to recover to pre-Recession levels. Economic data remains mixed. Those closest to the Fed’s printing press, i.e. banks, corporations and wealthy people, are experiencing boom times while the rest of the country struggles.
The ratio of jobseekers to jobs in now under 3 to 1, and the mainstream media proclaims this fact as a positive sign. It’s not. New job openings are not increasing markedly, so the improvement in the ratio is being caused by discouraged workers leaving the workforce. U-6 remains high four years after the “end” of the recession and incomes remain low.